From Enron to Exxon

[RunInRed 16,996]

From Enron to Exxon

by Hunter

Sat Aug 02, 2008 at 10:15:15 AM PDT

I think there's something almost refreshing about the new "Drill Here, Drill Now!" battle cry from Republicans, oil companies, and conservatives. It's at least blisteringly up-front about being a giant screw-you to environmentalism, to the oncoming freight train of peak oil, and in fact to having any actual energy policy in general. The Republicans have decided that, since they don't have anything better to do, they're just going to use soaring gasoline prices to screw with everyone else. Soaring energy prices? Bah! Converting to alternative energy sources? Bugger off!

It's the legislative equivalent of mooning a tollbooth attendant.

But just to insert a good dose of conspiracy theory into the mix, isn't all this playing out suspiciously similarly to the Enron debacle?

It was the first years of the Bush administration: prices are soaring uncontrollably in the newly deregulated California energy markets. Enron, a company that has newly decided there is far more money to be made in marketplace speculation than in actual energy production or transmission, is powerful enough to control the flow of electricity throughout the state and region in question, which they do, squeezing supply further so that prices soar. They idle plants under their control in order to artificially reduce capacity; they reroute power away from the state, leading to an ongoing rotation of community blackouts. They and other energy companies then use the entirely manufactured demand "crisis" to demand long-term state contracts -- at locked-in rates far above what they would have gotten before the "emergency" -- as the only possible way to "solve" the problem. Republicans and Republican-controlled regulatory agencies take the side of the Enron and the corporations throughout the entire process. (Yeah, they were hoping we'd all forgotten about that -- we haven't.)

In the end, the contracts are signed, the Democratic governor of California is recalled due to a brilliantly plotted, corporate-financed campaign of misdirected consumer outrage, and the looting of the state energy markets would have gone off spectacularly except that in the process, the jackasses at Enron managed to leverage the company into a complete collapse via a number of similarly speculative/manipulative/illegal activities. Until the day they collapsed, though, they had politicians eating out of the palm of their hand, willing to grant them anything to "help" with the "crisis" that all of that unnecessary environmentalism and cruel corporate taxation had supposedly led us to.

Cut to 2008. Gasoline prices are soaring uncontrollably, and become a huge political issue. Oil companies and oil-connected politicians say that if certain corporate-friendly steps are taken to further consolidate the power of the extraction companies over existing regulation, prices will be better controlled. Republicans are at the forefront of this effort, taking the side of the corporations: we need to abandon our environmental protections, because they are suddenly killing our marketplace. We need more subsidies, and more cheap leases, and more corporate tax breaks, all so that noble but terribly put upon companies like Enron -- sorry, I mean Exxon -- can help us in this time of crisis.

What happens next? Let me guess, it's exactly what the Republicans and the oil companies are assuring us of -- we abandon the offshore drilling restrictions and, remarkably, prices almost immediately start subsiding this fall, even though not a single drop of oil is being drilled that wasn't being drilled the months before. The crisis is "solved", merely by acquiescing to something that didn't have any actual production or refinery impact. In the meantime, billions of dollars worth of new assets have been added to the very companies currently enjoying higher profits than any companies in the history of mankind.

Of course, there are differences. What Enron did was unequivocally corporate terrorism -- by intentionally cutting power to traffic lights, homes, elevators and whatnot they created an uncountable number of situations that could have led directly to injury and death, statewide. It wouldn't be reasonable to assume the same level of collusion here -- and it would be terribly irresponsible to muse on whether or not there aren't plenty of other energy executives and speculators who saw the Enron model of governmental blackmail, and decided that it was nothing short of brilliant, and looked to use it in a model in future anti-regulatory efforts.

But the similarities are striking, and in some ways, the Republican and energy company efforts to open offshore drilling -- something that everyone who isn't a baldfaced liar all agree will have zero impact on current production or prices -- are a very good analogy to the Enron blackmail. The entire purpose of new offshore leases would be as a boon to energy companies and market speculators, by infusing the speculative market with billions of dollars worth of new product at almost no expense to the companies themselves.

The oil companies can't drill those new leases, that much is clear. There's plenty of existing leases to drill, and they aren't drilling those either, and there seems no particular interest in rapidly expanding capacity in order to actually drill them.

But each company can hold those leases, and borrow against the value of those leases, and trade those leases, so that's the primary value of the new offshore plots -- as tradable assets on the speculative market. If we give them the leases (that is, charge them at the usual pittance), we're vastly increasing their available capital, vastly increasing the capital of the entire speculative market, and they don't have to lift an actual finger to see it happen. No drilling; no additional exploration; nothing. Only the creation of new paper.

In that sense, it is identical to Enron, in that these companies want these leases purely as tradable commodities in and of themselves, without actually having to do any actual extraction. It's 100% giveaway to the companies, it has nothing to do with the actual current cost of oil or gasoline, and it's being done in an environment of record profits and near-blackmail.

You have to admire the chutzpah of Republicans actually staging a pizza party on the floor of the darkened, shuttered House in order to actually celebrate their desire to help another set of corporate speculators plunder the energy markets at taxpayer and consumer expense.

Truly, the word "shameless" has lost all meaning.

Link

[AURaptor 1,137]

Republicans and Republican-controlled regulatory agencies take the side of the Enron and the corporations throughout the entire process. (Yeah, they were hoping we'd all forgotten about that -- we haven't.)

It's as if this dikweed has forgotten that it was a Republican President and a Republican Justice Dept. that prosecuted Enron.

But nice try, w/ the lame attempt to connect Enron, a failed energy company that clearly had some shady characters running it, to Exxon, which has done nothing wrong, what so ever.

Libs are such arrogant lying bastards, it's beyond silly.

[MDM4AU 337]

Republicans and Republican-controlled regulatory agencies take the side of the Enron and the corporations throughout the entire process. (Yeah, they were hoping we'd all forgotten about that -- we haven't.)

It's as if this dikweed has forgotten that it was a Republican President and a Republican Justice Dept. that prosecuted Enron.

But nice try, w/ the lame attempt to connect Enron, a failed energy company that clearly had some shady characters running it, to Exxon, which has done nothing wrong, what so ever.

Libs are such arrogant lying bastards, it's beyond silly.

And it comes as no surprise that Run is the one posting this...and from dailykos, no less.

[TitanTiger 20,708]

Big difference: energy in the US is a local to statewide market. At most it's a national thing. Oil is a global market. Exxon doesn't control the price of oil because they don't produce much of it themselves. They buy it at whatever the prevailing market price is.

[RunInRed 16,996]

The similarities have to do with Government "handouts" to big companies - and all from the limited government crowd - ironies abound.

[AURaptor 1,137]

The similarities have to do with Government "handouts" to big companies - and all from the limited government crowd - ironies abound.

Don't start w/ 'handouts', when you've got Gov. mandated subsidies to absolute dead beats, and Exxon ALONE is responsible for over 30 BILLION dollars in tax revenue for the U.S. Treasurey.... in ONE QUARTER!! For ONE company !!

And you're fussing over handouts?

[Tigermike 3,427]

ironies abound.

Especially when you post an opinion from kos that ends with this, "Truly, the word "shameless" has lost all meaning."

Oh yeah, while you are on the subject of hand outs, why don't you talk about all the handouts your Messiah has in mind.

[TitanTiger 20,708]

The similarities have to do with Government "handouts" to big companies - and all from the limited government crowd - ironies abound.

It's a government handout to simply lift restrictions on oil drilling in certain areas? That's news.

[RunInRed 16,996]

It's a government handout to simply lift restrictions on oil drilling in certain areas? That's news.

...Subsidies, and more cheap leases, and more corporate tax breaks...

The entire purpose of new offshore leases would be as a boon to energy companies and market speculators, by infusing the speculative market with billions of dollars worth of new product at almost no expense to the companies themselves.

The oil companies can't drill those new leases, that much is clear. There's plenty of existing leases to drill, and they aren't drilling those either, and there seems no particular interest in rapidly expanding capacity in order to actually drill them.

But each company can hold those leases, and borrow against the value of those leases, and trade those leases, so that's the primary value of the new offshore plots -- as tradable assets on the speculative market. If we give them the leases (that is, charge them at the usual pittance), we're vastly increasing their available capital, vastly increasing the capital of the entire speculative market, and they don't have to lift an actual finger to see it happen. No drilling; no additional exploration; nothing. Only the creation of new paper.

[TitanTiger 20,708]

Nice edit connecting subsidies and tax breaks to opening oil rich areas for drilling, even though no one is proposing either thing for Exxon.

But sorry, just because opening land for drilling ends up being an economic benefit to oil companies doesn't make it a government handout.

And we've discussed this before. Not all leases are created equal. The areas we've kept off limits are much more rich in oil than what's open and not being tapped. And the off limits areas are largely easier and cheaper to extract oil from.

[Tigermike 3,427]

It's a government handout to simply lift restrictions on oil drilling in certain areas? That's news.

...Subsidies, and more cheap leases, and more corporate tax breaks...

The entire purpose of new offshore leases would be as a boon to energy companies and market speculators, by infusing the speculative market with billions of dollars worth of new product at almost no expense to the companies themselves.

The oil companies can't drill those new leases, that much is clear. There's plenty of existing leases to drill, and they aren't drilling those either, and there seems no particular interest in rapidly expanding capacity in order to actually drill them.

But each company can hold those leases, and borrow against the value of those leases, and trade those leases, so that's the primary value of the new offshore plots -- as tradable assets on the speculative market. If we give them the leases (that is, charge them at the usual pittance), we're vastly increasing their available capital, vastly increasing the capital of the entire speculative market, and they don't have to lift an actual finger to see it happen. No drilling; no additional exploration; nothing. Only the creation of new paper.

You are aware that the oil companies pay the state and federal government tons of money for those leases don't you? That's before any drilling. If and when oil and gas are found, and recovered the state and federal govts get even more money.

HOW THE HELL IS THAT HANDOUTS?

[RunInRed 16,996]

Nice edit connecting subsidies and tax breaks to opening oil rich areas for drilling, even though no one is proposing either thing for Exxon.

But sorry, just because opening land for drilling ends up being an economic benefit to oil companies doesn't make it a government handout.

And we've discussed this before. Not all leases are created equal. The areas we've kept off limits are much more rich in oil than what's open and not being tapped. And the off limits areas are largely easier and cheaper to extract oil from.

So if not a handout, what exactly do you call giving cheap oil leases to these companies? Certainly it's worth more than any subsidy or tax break the government could pass along. Drilling is nothing more than a huge land grab. Come on TT, we all know what's going on here.

[Tigermike 3,427]

Nice edit connecting subsidies and tax breaks to opening oil rich areas for drilling, even though no one is proposing either thing for Exxon.

But sorry, just because opening land for drilling ends up being an economic benefit to oil companies doesn't make it a government handout.

And we've discussed this before. Not all leases are created equal. The areas we've kept off limits are much more rich in oil than what's open and not being tapped. And the off limits areas are largely easier and cheaper to extract oil from.

So if not a handout, what exactly do you call giving cheap oil leases to these companies? Certainly it's worth more than any subsidy or tax break the government could pass along. Come on TT, we all know what's going on here.

Do you have any idea how much they pay for those leases?

Tell us what's going on other than you posting BS that you know absolutely nothing about.

Tell us how much they pay for those cheap oil leases.

[RunInRed 16,996]

Educate yourself:

What is an oil and gas lease?

Under federal law, any adult U.S. citizen may obtain and hold a lease to explore and drill for, extract, remove, and dispose of oil and gas deposits on federal land. Corporations organized under U.S. law and municipalities may also obtain and hold oil and gas leases (CFR Who May Lease Land? 2004).

The lease provides the right to use as much of the leased land as is necessary to develop oil and gas resources. The lessee and his or her operator cannot build a house on the land, farm the land, or remove minerals from the leased land other than oil and gas (CFR Lease Rights 2004, BLM Instructions 2004). However, in most states, if the surface of land is owned by another party and oil and gas companies lease the mineral rights from the federal government, the companies do not have to receive permission from the surface owner before beginning operations (OGAP 2004).

Most leases expire at the end of a 10-year "primary term" but may be extended if diligent drilling operations are in progress, or if other conditions are met. The term of a lease can continue as long as the lessee produces oil and gas in paying quantities (CFR Duration of Lease 2004).

Leasing of minerals that are privately owned differs from the leasing of federal minerals because a private mineral lease is a contract between two private parties. Thus, in a private lease, a mineral owner can create stringent stipulations regarding how development may occur, for example, where access roads are built and which damages will be compensated (OGAP 2004, Chapter 3).

How is land leased?

Determining which land is leased is an ongoing process that often begins with informal expressions of interest from the public — usually oil and gas companies — who ask that certain parcels of public property be leased. BLM also decides to lease some land for management reasons (CFR How BLM Offers Leases 2004).

Each BLM state office is required to hold lease sales at least quarterly if land is available. These sales are first conducted competitively through an oral bidding process. Prospective lessees must bid in person or send a representative. Competitive leases are issued for a primary term of 10 years (CFR How BLM Offers Leases 2004, BLM Instructions 2004).

If land does not receive bids at competitive auction, prospective lessees can obtain a lease on the land non-competitively by submitting a bid to the proper BLM office. Non-competitive leases are also issued for a primary term of 10 years (CFR Non-Competitive Bids 2004).

How much do leases cost?

On auction day or at a time specified by an authorized officer, winning bidders pay an administrative fee of $75 per lease, the first year's rent of $1.50 per acre, and at least $2 per acre of their "bonus bid." (The minimum bid is $2 per acre; the bonus bid is what bidders offer above the minimum.) Winning bidders pay the balance of the bonus bid to BLM within 10 working days of the auction.

In addition to the initial payment, lessees pay rental rates of $1.50 per acre for the first five years for all leases beginning after December 22, 1987. Rates are $2 per acre for any additional year. Other rates may apply for leases that began prior to December 22, 1987. Rates can reach $10 per acre or higher for leases that are terminated and subsequently reinstated.

Lessees generally do not pay rent on land for which they are paying royalties (CFR Leasing Fees 2004).

http://www.ewg.org/oil_and_gas/part2.php

[Tigermike 3,427]

Educate yourself. Go to the auction and see if you can get win the bid with $1.50 per acre.

[tiger88 934]

If you want to make a steaming pile of crap look good, put it next to the daily kos.

[RunInRed 16,996]

If you want to make a steaming pile of crap look good, put it next to the daily kos.

The oldest adage in politics: when you can't dispute the facts, attack the source.

[tiger88 934]

If you want to make a steaming pile of crap look good, put it next to the daily kos.

The oldest adage in politics: when you can't dispute the facts, attack the source.

I don't give any credence whatsoever to a site that allows public celebration, mocking, and ridicule of people like tony snow when he just died or robert novak upon his announcement that he has brain cancer.

If you want to wallow in their filth, go right ahead.

[RunInRed 16,996]

If you want to make a steaming pile of crap look good, put it next to the daily kos.

The oldest adage in politics: when you can't dispute the facts, attack the source.

I don't give any credence whatsoever to a site that allows public celebration, mocking, and ridicule of people like tony snow when he just died or robert novak upon his announcement that he has brain cancer.

If you want to wallow in their filth, go right ahead.

Did that article have anything to do with Tony Snow or Robert Novak? Just checking.

[tiger88 934]

If you want to make a steaming pile of crap look good, put it next to the daily kos.

The oldest adage in politics: when you can't dispute the facts, attack the source.

I don't give any credence whatsoever to a site that allows public celebration, mocking, and ridicule of people like tony snow when he just died or robert novak upon his announcement that he has brain cancer.

If you want to wallow in their filth, go right ahead.

Did that article have anything to do with Tony Snow or Robert Novak? Just checking.

I doubt it, but the site is a piece of crap run by piece of crap type people who allow that sort of stuff to go on.

Like I said, wallow in their filth if you want to, you seem to fit right in there if you endorse the site.

[RunInRed 16,996]

If you want to make a steaming pile of crap look good, put it next to the daily kos.

The oldest adage in politics: when you can't dispute the facts, attack the source.

I don't give any credence whatsoever to a site that allows public celebration, mocking, and ridicule of people like tony snow when he just died or robert novak upon his announcement that he has brain cancer.

If you want to wallow in their filth, go right ahead.

Did that article have anything to do with Tony Snow or Robert Novak? Just checking.

I doubt it, but the site is a piece of crap run by piece of crap type people who allow that sort of stuff to go on.

Like I said, wallow in their filth if you want to, you seem to fit right in there if you endorse the site.

I don't endorse anything but I do stand by my post and I will continue to post legitimate stories originating from there and from all over the web. BTW - you are not the first from your "side" to try to censor ideas, articles, sites, and other musings not inline with your own. Very telling.

[tiger88 934]

If you want to make a steaming pile of crap look good, put it next to the daily kos.

The oldest adage in politics: when you can't dispute the facts, attack the source.

I don't give any credence whatsoever to a site that allows public celebration, mocking, and ridicule of people like tony snow when he just died or robert novak upon his announcement that he has brain cancer.

If you want to wallow in their filth, go right ahead.

Did that article have anything to do with Tony Snow or Robert Novak? Just checking.

I doubt it, but the site is a piece of crap run by piece of crap type people who allow that sort of stuff to go on.

Like I said, wallow in their filth if you want to, you seem to fit right in there if you endorse the site.

I don't endorse anything but I do stand by my post and I will continue to post legitimate stories originating from there and from all over the web. BTW - you are not the first from your "side" to try to censor ideas, articles, sites, and other musings not inline with your own. Very telling.

Are you really that daft? I'm not advocating censoring anything. It helps us know who the loons are. Oh, and yes, you are endorsing the site by linking to it. For you to say you aren't is hilarious. Wallow in that filth baby.

[TitanTiger 20,708]

Nice edit connecting subsidies and tax breaks to opening oil rich areas for drilling, even though no one is proposing either thing for Exxon.

But sorry, just because opening land for drilling ends up being an economic benefit to oil companies doesn't make it a government handout.

And we've discussed this before. Not all leases are created equal. The areas we've kept off limits are much more rich in oil than what's open and not being tapped. And the off limits areas are largely easier and cheaper to extract oil from.

So if not a handout, what exactly do you call giving cheap oil leases to these companies? Certainly it's worth more than any subsidy or tax break the government could pass along. Drilling is nothing more than a huge land grab. Come on TT, we all know what's going on here.

So...in the quest to open more land for drilling to eventually bring more domestic oil to market (and thus hedge against the machinations of OPEC) and help bring the price of oil down, we should make anyone who is willing to spend the millions of dollars it takes to explore and drill those areas pay top dollar so people like you won't whine that it's a government handout? Sounds like cutting off your nose to spite your face.

Don't get me wrong, I want us to invest in drastically better fuel efficiency and alternative fuel sources to make us less dependent on oil too, but it doesn't have to be an either/or proposition. Drill AND conserve AND develop new energy sources. All of those things will benefit us long and short term.

[RunInRed 16,996]

Nice edit connecting subsidies and tax breaks to opening oil rich areas for drilling, even though no one is proposing either thing for Exxon.

But sorry, just because opening land for drilling ends up being an economic benefit to oil companies doesn't make it a government handout.

And we've discussed this before. Not all leases are created equal. The areas we've kept off limits are much more rich in oil than what's open and not being tapped. And the off limits areas are largely easier and cheaper to extract oil from.

So if not a handout, what exactly do you call giving cheap oil leases to these companies? Certainly it's worth more than any subsidy or tax break the government could pass along. Drilling is nothing more than a huge land grab. Come on TT, we all know what's going on here.

So...in the quest to open more land for drilling to eventually bring more domestic oil to market (and thus hedge against the machinations of OPEC) and help bring the price of oil down, we should make anyone who is willing to spend the millions of dollars it takes to explore and drill those areas pay top dollar so people like you won't whine that it's a government handout? Sounds like cutting off your nose to spite your face.

Don't get me wrong, I want us to invest in drastically better fuel efficiency and alternative fuel sources to make us less dependent on oil too, but it doesn't have to be an either/or proposition. Drill AND conserve AND develop new energy sources. All of those things will benefit us long and short term.

So I assume, you would be equally mad if after receiving these leases, the oil companies choose not to drill on them and rather trade their new found assets to further leverage their financial position w/o bringing product to market?

Also - just curious: do you really believe that any net oil we obtain from this new exploration (prob 4-8 years from now or more) will have any substantive affect on world-wide oil prices?

Finally, I assume you are on board with Obama's compromise energy plan that he has been discussing in recent days that would allow for some new exploration and keep a focus on alternative investment?

[TitanTiger 20,708]

Actually I do think Obama's proposed idea, in principle, is a good approach. Of course, the devil is in the details as to what he means by "limited" and "compromise."

Now, that being said, if we did give the oil companies leases to drill in areas they've been begging to drill on for decades and they chose not to do so but just leveraged it to get money, I would be pissed. And yes, I do think if the market sees that we are serious about drilling in those areas (as in, Congress and the states involved approve it, the oil companies start making concrete plans to drill, etc.), the price will be affected in a good way. Even if it's 4-8 years away from hitting the market. So much of commodity futures is based on perception that I believe you will see downward movement on the price.